On February 8, Jiangxi Zhengbang Technology Co.Ltd(002157) opened below the limit and closed at 7.17 yuan on the same day. This is the opening limit for the second consecutive trading day after Jiangxi Zhengbang Technology Co.Ltd(002157) disclosed the performance forecast. Previously, Jiangxi Zhengbang Technology Co.Ltd(002157) predicted a maximum loss of nearly 20 billion yuan in 2021. On the whole, the cost pressure of the breeding industry is still large. So far, six pig breeding enterprises have suffered losses in the performance forecast of 2021.
On January 28, Jiangxi Zhengbang Technology Co.Ltd(002157) (hereinafter referred to as “the company”) disclosed the performance forecast for 2021. In 2021, the company expects the net profit attributable to the shareholders of the listed company to be 18.2 billion yuan to 19.7 billion yuan, a decrease of 416.84% to 442.96% over the same period of the previous year. The amount of loss ranks first among the pig breeding enterprises that have disclosed the performance forecast.
The performance forecast shows that during the reporting period, the company sold 14.9267 million pigs, a year-on-year increase of 56.14%. Due to the decline in the market price of live pigs in China, the average sales price of a single head of the company was 16.60 yuan / kg, a year-on-year decrease of 16.10 yuan / kg, and the income of a single head decreased by 1653 yuan. The increase of sales volume combined with the decrease of sales price affected the profit of 8.873 billion yuan. In this regard, Jiangxi Zhengbang Technology Co.Ltd(002157) further explained in the performance forecast that “the company has a single industry and its profit contribution is mainly pig breeding business, which is more affected by the pig cycle than diversified companies”.
In addition to the decline in sales price, Jiangxi Zhengbang Technology Co.Ltd(002157) elimination of production capacity also has a certain impact on the current profit. The performance forecast shows that from 2019 to 2020, the whole industry is in a state of rapid expansion, and the company makes rapid expansion by outsourcing high-priced sows. During the reporting period, the company’s self-produced sows increased rapidly and the price of Chinese pigs continued to decline. The company disposed of inefficient sows purchased at a high price in the early stage, with a total of about 2.2 million dead Amoy fertile sows and backup sows, with a loss of 6.2 billion to 6.8 billion yuan. At the same time, the company had significantly and rapidly increased the production capacity of pigs, but due to the low utilization rate of the company’s overall production capacity during the reporting period, resulting in losses such as depreciation of vacant fences, and the clearance of inefficient and uneconomical rental farms, resulting in a total loss of about 1.5 billion yuan. In 2021, the price of live pigs remained low, and the net realizable value of the company (according to the estimated selling price of each region minus the expected cost and related expenses of pigs on hand to the listing date) was lower than the cost. The company made a total of about 1.2 billion yuan.
However, Jiangxi Zhengbang Technology Co.Ltd(002157) said in the performance forecast that the company’s overall cash flow is stable and there is no risk of capital chain rupture.
In fact, the overall performance of pig breeding enterprises in 2021 is relatively low. According to the data of Hithink Royalflush Information Network Co.Ltd(300033) , Jiangxi Zhengbang Technology Co.Ltd(002157) , Wens Foodstuff Group Co.Ltd(300498) , New Hope Liuhe Co.Ltd(000876) , Tech-Bank Food Co.Ltd(002124) and other four head pig breeding enterprises that have disclosed the performance forecast for 2021, the total loss (the upper limit of the forecast net profit) has exceeded 43.3 billion yuan. Among the ten pig breeding enterprises, only one of them realized a year-on-year increase in net profit in 2021.
At present, the market price of live pigs is still low, and the cost test faced by breeding enterprises still exists. In February 8th, the official account of WeChat of the national development and Reform Commission announced that in from January 24th to 28th, the average price of pig grain was 5.57: 1, which was between 5:1 and 6:1 for three consecutive weeks, and entered an early two grade warning interval. According to the statistical data of China Galaxy Securities Co.Ltd(601881) in January, the profit of self breeding and self breeding entered the state of deep loss again. The aggravation of the loss may further drive the industry to reduce production capacity, and the cumulative decline of fertile sows will gradually increase.
However, some institutions are still optimistic about the follow-up development space of the aquaculture sector, focusing on companies that can effectively control costs and get through the cycle. Zheshang Securities Co.Ltd(601878) believes that China’s pig breeding industry has more than trillion market space, and the improvement of breeding concentration in the future will bring growth opportunities to large-scale enterprises. The cyclical trend of pig industry is expected to continue. Sow reserves are abundant, cash flow is abundant, adhere to contrarian expansion and other factors are expected to help the company further improve market share, cost control industry leader or help through the cycle. Citic Securities Company Limited(600030) also said that with the digestion of pig seedlings purchased at a high price in the early stage and the continuous improvement of pig production and operation efficiency, we can pay attention to companies whose costs decline quarter by quarter.
